A taxing time for streaming
SA MAY HELP KILL DEAL ON TARIFFS
Developing economies are voicing their concerns about the dominance of US-based Big Tech.
The decades-old global consensus that’s allowed e-commerce and a growing tidal wave of data to cross borders without tolls is at risk of falling apart. Every couple of years since 1998, World Trade Organisation (WTO) ministers have renewed a moratorium on digital customs charges. It’s kept online transactions – a Netflix movie streamed in South Africa, an international Zoom call with a doctor in India, an e-book downloaded on a beach in Bali – free of tariffs throughout the internet age.
Maybe not for much longer. The WTO meets in Abu Dhabi next week with the latest moratorium set to expire next month. At least three large developing economies are signalling they will oppose another extension. Because the WTO operates on consensus, all it takes is one to kill it.
The tariff ban has helped fuel the fastest-growing segment of world trade: digital goods and services.
They are key to the success of not just tech companies like Amazon and Netflix but also the growing number of traditional firms that collect data and conduct e-commerce in foreign markets.
Now, emerging economies cite concerns about the dominance of US-based Big Tech and other worries like risks from artificial intelligence, the need to protect data privacy and the loss of customs revenue into the ether of the digital economy.
“It’s not a done deal,” says John Denton, secretary-general of the International
Chamber of Commerce, referring to the efforts to renew the arrangement.
He cites Indonesia, the largest economy in Southeast Asia, as a major holdout with SA and India likely to follow.
“We think this will go down to the wire,” he adds.
It’s not the first time countries have threatened to let the moratorium lapse to win concessions from major exporters of digital services like the US. But there’s a sense that they are not bluffing this time.
Indonesia believes governments need to be free to impose tariffs in response to rapid change in the digital world, says the directorate general of customs and excise at the country’s ministry of finance.
India has signalled a similar position. A spokesperson for SA’s trade department declined to comment.
One difficulty is the lack of an international legal framework or standard definitions for digital trade. This means it’s not clear how governments will apply tariffs – whether they will charge per transaction, per byte or per digital product, like a song, for instance.
The sums they will raise aren’t huge. A study by the Organisation for Economic Cooperation and Development found that taxing digital transfers will only add about 0.1% to government revenue. Ending the moratorium “will send a shockwave through the WTO”, an organisation dedicated to lowering trade barriers, says its longtime spokesperson Keith Rockwell.
“For the first time since the WTO’s founding, members will have opened the door to applying new tariffs,” he adds.
More than 180 business groups around the world, including the US Chamber of Commerce, wrote an open letter backing the status quo. They said countries seeking to impose tariffs will harm themselves in the long run by sending a negative signal about their business climates and openness to investment.
Ending the moratorium will send a shockwave